CBO FINDS NO FREE LUNCH IN MINIMUM WAGE HIKE

This week’s report by the Congressional Budget Office won’t settle the decades-old argument about whether low-income families are hurt or helped by raising the national minimum wage.

However, because it clearly lays out the trade-offs that flow from higher government wage floors, the CBO has injected a big dose of intellectual honesty into the debate.

President Barack Obama and congressional Democrats want to increase the federal minimum to $10.10 from $7.25 an hour.

But that could cause 500,000 workers across the U.S. economy to lose their jobs in the second half of 2016, the CBO said in a report released Tuesday. On the other hand, it would boost incomes of 16.5 million low-wage workers and lift 900,000 families out of poverty.

In other words, there’s a trade-off: 500,000 workers could see wages fall to zero so that 16.5 million can receive fatter paychecks averaging $300 a year.

In California, politicians have already decided such trade-offs are worth making, passing a law that raises the state minimum to $9 in July and $10 in 2016. And Interim Mayor Todd Gloria has called for a November referendum that would create a presumably higher minimum wage in San Diego.

For those who question how a higher wage floor could hurt anybody, the CBO predicted the new federal minimum would push up prices slightly for some goods and services, causing consumers to spend less and forcing businesses to cut jobs or forego raises for higher-paid workers.

And the policy would force another trade-off. A $10.10 federal minimum would raise incomes for low-wage workers by $31 billion — but subtract $17 billion from families that earn six times the poverty level, which is about $120,000 a year for a family of three.

From this perspective, raising the minimum wage looks more like a classic government transfer of wealth. Some people lose their jobs or see incomes fall so that somebody else can get a mandatory raise, regardless of performance.

Bear in mind that this analysis comes from the numbers-crunching agency of Congress, which is technically nonpartisan but is in fact staffed with mostly liberal economists.

And there’s nothing ironclad about the CBO’s economic estimates. Indeed, the same report that estimates job losses at 500,000 also says they either could be “very slight” or reach 1 million workers.

Still, I find the report completely refreshing. Like most economic concepts, the minimum wage has been abused by partisans of every stripe, with Democrats dismissing the cost in terms of jobless families and Republicans exaggerating the cost to employers.

Among economists, the disagreement is more abstract and burns at a much lower level. After all, 500,000 job losses for a $31 billion raise is small potatoes in a national economy that employs 137 million people and produces $17.1 trillion in goods and services.

Everybody agrees that President Franklin Roosevelt enacted the first wage floor, 25 cents an hour, in 1938. The minimum peaked in 1968 at $1.60, which translates to $10.71 in 2013 dollars.